McAuliffe proposes Medicaid 'pilot program'

Gov. Terry McAuliffe announces his proposed pilot program to expand Medicaid health insurance coverage to more people for at least two years on March 24, 2014.

Gov. Terry McAuliffe announces his proposed pilot program to expand Medicaid health insurance coverage to more people for at least two years on March 24, 2014.

Travis Fain, tfain@dailypress.com

RICHMOND – Gov. Terry McAuliffe on Monday proposed a pilot program to expand Medicaid health coverage for the poor for at least two years.

The governor pushed his proposal as a potential break in a logjam on the divisive issue, but it didn't seem to change the calculus much in Richmond, where legislators gathered Monday for a special session.

House Republicans, who have been standing in the way of expansion, expressed exasperation with the governor and reiterated their call to separate the Medicaid debate from state budget talks. They also rejected his proposal in a quick committee vote.

Even a key Republican state senator, who has partnered with McAuliffe on a compromise expansion plan called Marketplace Virginia, expressed surprise with the governor's move.

The pilot project would expand health insurance coverage to as many as 400,000 low-income Virginians and use something like $2 billion a year in federal tax dollars to do it. The federal government has promised to fully fund these expansions across the country through 2016 as part of the Affordable Care Act, also known as "Obamacare."

After that, the federal funding starts to fall, eventually reaching 90 percent. House Republicans have balked at expansion for several reasons, but chief among them is a belief that the federal government will cut back even further, leaving the Virginia state budget to carry the weight of a massive entitlement expansion.

McAuliffe is looking to short-circuit that argument with his pilot project, which state leaders could end once the 100 percent federal match starts to drop. During a morning press conference, McAuliffe held up a letter from the U.S. Centers for Medicare and Medicaid Services that says Virginia can temporarily expand Medicaid without penalty and without losing any existing Medicaid funding.

Just what this two-year program would look like, if the General Assembly accepts it, remains to be seen. House Republicans said it sounded to them like outright expansion, "built on the false promise of free money from Washington," in the words of Del. John M. O'Bannon, R-Richmond, a House budget negotiator.

McAuliffe's secretary of finance, Ric Brown, said the budget effects contemplated in the proposal are indeed based on traditional expansion. But he also said there's flexibility built in for legislators.

Secretary of Health and Human Resources Bill Hazel said much the same thing — that lawmakers could choose outright expansion, adding people to existing Medicaid rolls, or something akin to Marketplace Virginia.

That proposal would use the federal money to buy private insurance policies for many of the people who would become eligible if Medicaid were simply expanded.

Even before McAuliffe's proposal there was talk of some "trigger" language to undo expansion as the federal money shrinks. House Republicans repeatedly questioned whether, politically, such a large entitlement expansion could be undone. On Monday, O'Bannon questioned the state's ability to phase the program in, then right back out, logistically.

"I don't know how in the world you stand up a two-year program, get it up and running, then just stop it after two years," he said.

Hazel said it can be done. Much of Medicaid is run by insurance companies now, and expansion administration could be handled by contractors, or by "limited positions" within state government, he said.

The governor proposed this pilot program as part of his overall budget proposal, a $96 billion, two-year plan that includes roughly $225 million in savings dependent on expansion. Most of that money comes from cuts in indigent health care payments the state makes now to hospitals that help the poor.

If those people sign up for Medicaid, it shifts those costs to the federal government, but House Republicans have repeatedly questioned the methodology used to predict these savings, and the projections have changed dramatically over the last few years.

McAuliffe's budget would take $100 million from these predicted savings and sock it away to cover state Medicaid costs when the federal payments drop.

The House shelved this budget in favor of its own plan, which doesn't include Medicaid expansion and is based in large part on House and Senate negotiations as they stood at the end of the regular session, which deadlocked earlier this month over Medicaid expansion.

The Senate took a slower path, and plans a public hearing on the budget next Tuesday.

Peninsula legislators responded to the governor's proposal largely along party lines. Dels. Brenda Pogge, R-Norge; Gordon C. Helsel, R-Poquoson; and David E. Yancey, R-Newport News, all said the debate over Medicaid expansion — in whatever form — should be separated from the budget debate.

"(The governor's proposal) adds to the conversation, it adds to the debate," Yancey said. "All the more reason to decouple it from the budget."

State Sens. Mamie Locke, D-Hampton, and John Miller, D-Newport News, applauded McAuliffe's proposal. The two-year timetable should wipe away concerns about future effects on the state budget, Locke said.

"So now what's the excuse?" she asked.

But House Republican leaders were incensed that the governor dropped an undetailed Medicaid proposal on them the morning that the new session began without mentioning it during talks last week.

"A new concept again, at the 11th hour," said House Appropriations Chairman S. Chris Jones, R-Suffolk. "It's just not good public policy."

And Watkins, a key architect of the Marketplace Virginia plan that McAuliffe has expressed support for in the past, said he wasn't consulted before the move.

Even so, state Sen. Thomas K. "Tommy" Norment, R-James City, saw some potential to break the gridlock in McAuliffe's proposal. It won't move the needle immediately, but "it has the potential of being the catalyst of fostering discussions," he said.